All posts by Jamie MacAlister

Jamie teaches risk and strategy at Hult International Business School and the International Health Sciences University in Kampala, Uganda. He is also an executive coach, facilitator, strategist and commercial manager, having previously been Commercial Director at Ashridge. He has had over twenty years experience as a management consultant with PwC and running his own business, Blonay. He learned about marketing with Procter & Gamble, has an MBA from Wharton Business School and an MA Engineering from Cambridge University.

Could Federer have won by taking more risk?

 

Yesterday, Djokovic won the ATP World Tour Finals tennis at the O2, beating Federer by two sets to zero.   I was disappointed because Federer had indicated he would pursue a more aggressive style of tennis, in particular by coming to the net to volley more often.  Overall, in 116 rallies in all, Federer lost because he only won 46% of them.  When he came to the net in rallies, he won 65% of the time.   But he only came to the net for 17 of those rallies!   The statistics suggest that if he had come to the net more often, he might have won.   Why didn’t he?  Part of the reason could be summarised in this extract from my book: “Risky Strategy”

[Extract from “Risky Strategy” to be published in 2016]   

My game is tennis, and I notice that an approach to risk is being played out on a point-by-point basis.  An approach can be planned in advance, in the form of an overall match or set strategy, but in reality you have a point strategy, or even an in-the-moment shot strategy.  So how does risk manifest itself in tennis?   Well, one way is in the approaches to the net as shown in the following diagram.  This is based on some fairly rough and ready research of rally length and outcomes in professional games.  The average rally length in a game is around a surprisingly low five to six shots total, so less than three per player.  In terms of winning or losing shots, at the top professional level of the game, this is split very close to 50:50 – it’s surprising how close a lot of professional games are in terms of points won or lost.

Tennis risk chart

So what is this chart showing us?  This is an equivalent to a normal distribution curve for two types of tennis shot: the blue bars represent the distribution for shots played from the back of the court, and the red from the net area.  There are just three points in the distribution for each shot type, as we are only interested in three possible outcomes from the shot; either it’s a winning shot, it’s a losing shot, or the rally continues so that the player gets another shot.

So first to note that our flatter ’curve’ is our more risky shot, remembering the way I demonstrated risk and variability in the earlier chapter. In other words, there is more variability in possible outcome with our flatter (brown) net shot – which is what we would expect. The net shot is more risky; there is more chance of the extreme outcomes, either a win or a loss.

A back of the court shot is less risky; it has a more peaked profile – the most likely outcome from the shot by a good margin is a continuation of the rally.

So what we see from this is that the shot which has a higher chance of winning the point is the shot at the net – ie the more risky shot.

What is interesting is that tennis players know this, and yet the shot at the net is a relatively rare part of the game at the professional level today.  It used to be more regularly played; up until the late 1970s and early 1980s, the serve and volley at the net was a regular way for players to win points, particularly on grass courts.   Of course, there are a number of reasons why that has changed. Tennis balls are slower and make it harder to hit winners.  The perfected top spin ground shot, pioneered by Bjorn Borg, changed everything, making it easier to hit dipping passing shots.  And longer rallies and games means energy is a bigger factor – coming to the net expends more energy.

However, the most interesting feature of this analysis is one other reason why us tennis players are more reluctant to come to the net. Yes there may be a higher chance that the shot will be a winner.  But there is also a higher chance it will be a loser.   And, in the tiger moment, away from rational elephant analysis, our loss aversion kicks in!

Choosing risks and winning aspirations ; the Race to the Pole

[An excerpt from the book “Risky Strategy” to be published in 2016]

We see an intriguing relationship between “winning” and “risk” in the race to the South Pole in 1910, between the English Robert Falcon Scott and the Norwegian Roald Admundsen.  For both explorers, winning was in part at least about being the first to reach the South Pole, one of the last unexplored areas on Earth.  For both, this undoubtedly involved a high level of personal risk, to themselves and their chosen teams. But this is where the similarities end.

Admundsen reached the Pole first, and returned to their ship with a team completely in tact. Scott by contrast arrived at the Pole weeks later;  he and his entire team failed to return alive.

What else was different?  Firstly, their specified goals were different. Admundsen had a single goal: to be the first to reach the South Pole.  It was probably the best example of a clearly defined and focused winning aspiration – easy to confirm or measure success.  Scott had two goals: to get to the Pole first, like Admundsen, and to gather scientific information about the Antarctic.  As a result of this, they each took different types of risks.

For Scott with his dual goals, in a situation where time was a critical factor,he delayed on his return trip to collect geological samples, which also added weight to his sledges.  Admundsen, on the other hand, took a different kind of risk, which was consistent with his winning goal. While Scott chose a route from McMurdo Sound, which had already been partly explored by Ernest Shackleton in 2007,  Admundsen chose an unchartered route, from the Bay of Whales, which was on the edge of the Great Ice Barrier, where explorers had feared that the ice could fracture and send you floating away.  But Admundsen chose this because it was 60 miles closer to the Pole. In addition, because Scott has assumed Admundsen would choose the same route as him, he assumed that he was ahead of him, as there were no signs of Admundsen’s tracks.  With this assumption, he had no compelling driver to go faster.

However, in this amazing story, even though the single-minded winning goal that Admundsen led to certain risks, he compensated for this by reducing risk in other ways. He had investigated the records of other explorers who had been in the area, and noted that the ice had remained unchanged for decades.  So this gave him more confidence in his choice of routes.

Admundsen had also researched the best type of transport to use extensively by spending time with the Inuit Eskimos in the Arctic.  He used dogs which were very well suited to the extreme conditions. Scott, on the other hand, for most of the journey used a combination of ponies, motor sledges and man-hauling. The motor sledges were untested and quickly broke down. The ponies although they could haul heavier loads than dogs were also ill suited – they had no natural vegetation to feed on, sweated through their hides which led heavy ice to form and caused them to sink more deeply into the snow – they all had to be put down.  This left man-hauling for most of the journey, recommended by Shackleton to be the best and most noble approach. But a noble but ill-conceived approach didn’t get the job done.

What this famous piece of history tells us about winning and risk, is that while a winning aspiration creates the need and appetite for risk, leaders need to be choiceful about which risks they take, which ones they work hard to avoid.

 

For such a time as this – students seek new “capitalism”

I was struck by Paul Polman’s comments in this interview that students that he visits around the world are seeing the need to “evolve capitalism and create a more equitable and sustainable form of growth. They get it, they really get this need for change!”   http://www.theleadershipvanguard.com/#/paul-polman/

Last week, I ran two sessions on “Risks in the global supply chain” with undergraduates at Hult Business School – representing a fairly balanced mix of students from Europe, The Americas, Asia and Africa.  We talked about global strategy making, referring to my book, “Risky Strategy” –  there was some interest. I then introduced a case study based on the research we had just completed on modern slavery in the global supply chain, in which we had talked to a number of the UK’s top retailers. The engagement levels increased dramatically.

The class discussions battled with the challenges presented by a capitalist system that requires retailers to compete in the interests of the consumers,  and the need for those same retailers to collaborate to truly be able to tackle this pernicious issue of slavery.  Has the mantra the “customer is king” in reality been translated to mean the “worker is slave”?  Is this particularly the case because the “customer” in value terms is primarily from the wealthy developed nations, and the “worker” predominantly from the poorer developing nations?

Is this a time for business leaders like Polman to challenge these basic assumptions?  Its risky… yes and ..?   Is this a time for business to become part of the solution rather than part of the problem.  The students seem to think so!

 

 

Opportunity for business to take the right risk

As I put the finishing touches to a book which explores risk taking in strategy making,  our Ashridge / Hult report on how business can tackle the ills of modern slavery has just been published.

We talked to the biggest retailers in the UK and the majority believe there is an issue of slavery in their global supply chains.  Now UK legislation is a catalyst to do something about it.  But to really address the issue requires a big change of mindset – and the risk that goes with that.

Small Risky Strategy coverHere is a synopsis of my book on risk and strategy, which concludes with the question: For such
a time as this,  is business part of the solution or part of the problem?

This is a story that brings together and dismantles the well-used, and often abused, business terms “strategy” and “risk” in an exploration of what happens when the two concepts collide. The story suggests that strategy is inherently risky, and that leaders and their organisations need strength of character in order to take the right risks in making strategic decisions. It explores the different ways in which leaders work with risk, and introduces us to formal analytical “elephants” and informal intuitive “tigers”. I look at risk as variability and as crisis – and how this flows through to financial and reputational risk. I look at illusions and mind games that can throw us off the scent. I draw on the philosophy of winning, from business, military and sport perspectives. I consider how leaders select the right variables, and combine analysis with intuition to take smart risks. I look at how they innovate, and how they mitigate the risks of innovation. I think about what makes organisations better at dealing with risk, and what helps us as leaders to feel safer with it. This journey draws from my experience as a lifelong business strategist, and from recent research I have been part of at Ashridge , looking at leadership and risk, and more specifically at the way organisations are currently addressing the confirmed existence of modern slavery in their global supply chains. The story concludes by questioning whether now is a time for business leaders to be proactive as the solution to, and not the cause of, such social issues, whether they need to re-think what is meant by winning, and what implications this might have for taking the right risk in strategic decisions.